Medicare drug-plan deadline near

Midnight Dec. 31 is the cutoff to enroll in stand-alone plans for 2007

SAN FRANCISCO (MarketWatch) -- People 65 and older and the disabled who haven't yet signed up for a Medicare prescription drug plan or want to switch to a new one for 2007 have until Dec. 31 to enroll.

The second annual sign-up period began Nov. 15 and will remain open until midnight on Sunday. Operators will be available to answer questions at 1-800-Medicare and its www.medicare.gov Web site will be able to handle the traffic, Medicare spokesman Jeff Nelligan said. Those who are satisfied with their current coverage don't have to do anything. The next opportunity to choose a plan will be in November next year.

This year, the Centers for Medicare and Medicaid Services is granting an exception to beneficiaries who received their annual notice of change letters after Nov. 15. These required letters from health insurers describe changes to the list of covered drugs, or formularies, that will go into effect next year. About 250,000 beneficiaries received those letters late and will be granted a special enrollment period, beginning Jan. 1 and ending Feb. 15, Nelligan said.

Older Americans no matter how healthy they are would be wise to consider joining a plan if they haven't already, said Brian Poger, president of Senior Educators, an insurance brokerage in San Francisco. Watch interview with Poger.

"It probably does make sense to have drug coverage, regardless of whether you get it in a stand-alone fashion or an integrated fashion," Poger said.

He suggested shopping around not just for the best premium price but for the best total costs and plan features for a person's particular needs. See Vital Signs on what to look for.

"We're actually finding a lot of people that didn't want to spend the premium on the stand-alone drug plans, they just go into an integrated plan, a Medicare Advantage plan, because they get the health and the drug for less than the cost of the drug alone," he said. "I know that seems strange, but with the way the government payments work it actually works out better for both the consumer and the insurance companies."

The 'doughnut hole' problem

Beneficiaries with drug coverage pay $24 a month on average for their plan premiums, Nelligan said.

About 8% of those in the program, or less than 3 million people, hit the coverage gap known as the doughnut hole, which in 2007 generally will occur after a person spends $2,400 in drug costs and goes on to spend $3,850 out of his or her own pocket. After spending $3,850 the plan kicks in again.

This year 29% of plans offered coverage in the doughnut hole, with median premiums for plans that included coverage in the gap running $45.37, Nelligan said. Still, the vast majority of plans with coverage in the gap only pay for generic drugs.

Many insurance companies find covering brand-name drugs in the doughnut hole is too expensive to be viable, Poger said.

"It's very difficult to do," he said. "There's only really a couple companies that are still trying to make it work this year and I suspect that's probably going to be a thing of the past unless there's a legislative change."

As of May, Medicare had about 16.6 million beneficiaries enrolled in stand-alone drug plans and another 6.3 million who got their drug coverage through integrated Medicare Advantage plans. About 90% of all Medicare beneficiaries have drug coverage either through the private plans, coverage from their employers or other sources, Nelligan said. Since Nov. 15, Medicare has drawn an estimated 930,000 new enrollments, he said.

Beneficiaries with some type of drug plan in 2006 saw per-person savings of $1,200 compared with not having any coverage, Nelligan said. For those who were eligible but waited to sign up, the penalty for enrolling after the first open enrollment period ended May 15 of last year is 1% a month, meaning beneficiaries who waited until this year to choose a plan face a penalty of 7% unless they had virtually equal coverage from their employer during that time.

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